Friday, August 19, 2011

Today we mourn the passing of a beloved old friend, Common Sense, who has been with us for many years. No one knows for sure how old he was, since his birth records were long ago lost in bureaucratic red tape.
He will be remembered as having cultivated such valuable lessons as:
- Knowing when to come in out of the rain;
- Why the early bird gets the worm;
- Life isn’t always fair;
- and maybe it was my fault.
Common Sense lived by simple, sound financial policies (don’t spend more than you can earn) and reliable strategies (adults, not children, are in charge).
His health began to deteriorate rapidly when well-intentioned but overbearing regulations were set in place. Reports of a 6-year-old boy charged with sexual harassment for kissing a classmate; teens suspended from school for using mouthwash after lunch; and a teacher fired for reprimanding an unruly student, only worsened his condition.
Common Sense lost ground when parents attacked teachers for doing the job that they themselves had failed to do in disciplining their unruly children.
It declined even further when schools were required to get parental consent to administer sun lotion or an aspirin to a student; but could not inform parents when a student became pregnant and wanted to have an abortion.
Common Sense lost the will to live as the churches became businesses; and criminals received better treatment than their victims.
Common Sense took a beating when you couldn’t defend yourself from a burglar in your own home and the burglar could sue you for assault.
Common Sense finally gave up the will to live, after a woman failed to realize that a steaming cup of coffee was hot. She spilled a little in her lap, and was promptly awarded a huge settlement.
Common Sense was preceded in death, by his parents, Truth and Trust, by his wife, Discretion, by his daughter, Responsibility, and by his son, Reason.
He is survived by his 4 stepbrothers;
I Know My Rights
I Want It Now
Someone Else Is To Blame
I’m A Victim
Not many attended his funeral because so few realised he was gone.
If you still remember him, pass this on.
If not, join the majority and do nothing.

WASHINGTON - As unemployment in the United States remains stuck above 9 percent, Libertarian Party Executive Director Wes Benedict released the following statement:"Every time politicians say they're going to create jobs, they end up destroying more jobs than they create.
"Here's the Libertarian approach to unemployment: cut taxes and spending, and let the free market work.
"Government intervention in the free market is what causes unemployment. There are many examples of this, well known to many economists. Minimum wage laws cause unemployment. Government-mandated unemployment insurance causes unemployment. Welfare and food stamps cause unemployment. Occupational licensing laws cause unemployment.
"One especially destructive factor is government prohibition of at-will employment. Because the government won't let employers hire, maintain, and fire employees on a truly at-will basis, it makes employment much riskier. Employers are scared to hire people because it can be so difficult to fire them if they don't work out, and employers are sometimes even scared to interview people because they might be forced to hire them. The result? More unemployment.
"What about all the 'stimulus spending' we've seen during the last two administrations?
"Stimulus spending doesn't create jobs, it destroys them. The government spends money by extracting it out of the productive private sector, which causes a net loss of jobs.
"Stimulus spending makes our future less secure, without doing any good in the present. It destroys jobs today, as well as down the road.
"Back in 2009, the Obama administration was worried that unemployment might reach 8 percent. So they pushed through a massive stimulus program, and unemployment went up even higher, to 10 percent. The stimulus program made our problems worse.
"And in 2008, George W. Bush championed a counterproductive plan to send $300-$600 stimulus checks to millions of people.
"Republicans and Democrats in the federal and state governments need to stop trying to help, because they're only making things worse. Instead, they need to get out of the way and let us free Americans solve the problem ourselves."
For more information, or to arrange an interview, call LP Executive Director Wes Benedict at 202-333-0008 ext. 222.
The LP is America's third-largest political party, founded in 1971. The Libertarian Party stands for free markets, civil liberties, and peace. You can find more information on the Libertarian Party at our website.

Avuncular billionaire investor Warren Buffett on Monday wrote a screed in the New York Times in which he calls for higher taxes on the wealthy because they pay so little in comparison with the little people he professes to want to help.
Don’t “coddle” me, Uncle Warren tells Uncle Sam: “While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks.”
He laments his personal tax rate of 17.4 percent, which he notes is lower than the actual tax rates of his non-billionaire underlings.
There are several problems with the billionaire investor’s logic and factual claims.
One, the federal government could take every single penny of wealth from Uncle Warren and his 400 billionaire friends - confiscate all of the stocks, bonds, real estate and other investments they own - and leave them paupers. The haul would total $1.3 trillion.
The government could take every penny of income from every household that earns $250,000 or more and end up with $1.4 trillion.
That combined $2.7 trillion would not even come close to covering this year’s $3.7 trillion of federal spending.
Two, Uncle Warren could return the approximately $100 billion of government bailout money that rescued eight financial companies he was invested in at the time, and he could forgo the $130 billion of debt backstopping provided to Buffett-owned companies by the government. He has not done so.
Three, Uncle Warren could give back the billions of dollars of profit he made trading on the preferred stock and warrants of Goldman Sachs, General Electric and other companies during the financial panic when he concluded lower- and middle-income taxpayers would be forced to rescue those companies by a government that was about to declare them “too big to fail.”
Four, Uncle Warren could ask Uncle Sam to lower the tax rates on his underlings, leaving them with more of the money they earn, instead of calling for higher taxes on rich people to justify confiscatory taxes on the middle class.
Five, Uncle Warren could pay more taxes. He lives primarily on long-term capital gains and “carried interest,” which are taxed at a 15 percent rate. He could refrain from taking tax exemptions and deductions, stop living off of capital gains and carried interest, or write billion-dollar checks to the U.S. Treasury out of his conviction that he should be paying more. He does not do any of this, instead insisting that others be forced to give to the government what he refuses to give voluntarily.
Six, several weeks ago Euro Pacific Capital Chief Executive Officer Peter Schiff compared a couple earning $250,000 with a couple in 1950 earning an inflation-adjusted equivalent amount and then looked at what they would pay in federal taxes taking the standard deduction. He included income taxes and payroll taxes for Social Security and Medicare and concluded that today’s $250,000 couple would pay 40 percent of their income. The 1950s couple would have paid 22 percent of their income.
“In other words, despite claims that taxes are at their lowest levels in 50 years, today’s high-earning couple pays over 80 percent more in federal taxes than their 1950 counterpart!” Mr. Schiff wrote.
How can this be when federal income tax rates ranged from 17.4 percent in the bottom bracket and 91 percent in the top bracket versus 10 percent and 35 percent today? A few of the big reasons: larger inflation-adjusted standard exemption in the 1950s; no alternative minimum tax; payroll tax of just 3 percent compared with 15.3 percent today (temporarily 13.3 percent); and a top income tax rate that kicks in at $371,150 versus $400,000 in 1950 (approximately $4 million adjusted for inflation).
Uncle Sam helped keep Uncle Warren a wealthy man during the financial crisis - and helped build his wealth long before the crisis.

Uncle Warren owns six life insurance companies and as any financial planner will tell you, life insurance can be an important part of a person’s investment portfolio. The more oppressive the tax climate becomes, the more life insurance Uncle Warren sells.
Bear all this in mind whenever you hear Warren Buffett demanding higher taxes on the wealthy.Steve Stanek is a research fellow at the Heartland Institute.

Tuesday, August 16, 2011

In the wake of the stock-market plunge and S&P downgrade, economic pundits of all stripes are rushing to explain events. But as so often happens in economics, “believing is seeing.” Keynesians, monetarists, and Austrians can all look at the slow-motion train wreck and feel vindicated by the data.
Of the major schools of economic thought, the Austrians have been the best guides through the crisis. But the champion Keynesian, Paul Krugman, has been running victory laps for a long time now, claiming that he has been right while the free-market folks have been dead wrong. His column late last week beautifully illustrates that the facts can always be molded to fit a preconceived narrative.

Krugman: We’ve Never Been in Recovery

Krugman opens up with this depressing claim:

In case you had any doubts, Thursday’s more than 500-point plunge in the Dow Jones industrial average and the drop in interest rates to near-record lows confirmed it: The economy isn’t recovering, and Washington has been worrying about the wrong things.

It’s not just that the threat of a double-dip recession has become very real. It’s now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery.
If you read his whole column, you would get the sense that Krugman has been this much of a Debbie Downer all along.
But actually he hasn’t — not in the same way that the Austrians have confidently said all along that the “recovery” and “green shoots” were completely bogus. For example, in August 2009 Krugman wrote,

I’m still very worried about the economy. There’s still, I fear, a substantial chance that unemployment will remain high for a very long time. But we appear to have averted the worst: utter catastrophe no longer seems likely.

And Big Government, run by people who understand its virtues, is the reason why.

A little later that month, Krugman was more definitive. In a blog post entitled, “The Answer Is Yes,” he opened with the following: “Barara Kiviat asks, is this a recovery or isn’t it? The answer is yes.”
Now of course, we’re dealing with Krugman here. So anything he writes is capable of being matched up, after the fact, with whatever happens. All along, he has said that the job situation remains abysmal, the Republicans are itching for the chance to derail the fragile recovery, and so on. Just as he expertly covered himself on the stimulus — he can claim it was big enough to avoid another Great Depression, but not big enough to lead to a healthy economy — so too has Krugman always left himself an escape hatch in his discussion of the economy.
Even so, when it comes to people warning that this was not a recovery, the Austrians were clearly right and Krugman was wrong: go reread the quote above if you doubt me.

Krugman: If Only We Had Gotten More Inflation and Deficits

Now we come to the really fun part, where Krugman matter-of-factly explains why we’re still stuck in this mess, three years and running:

To turn this disaster around, a lot of people are going to have to admit, to themselves at least, that they’ve been wrong and need to change their priorities, right away.

Of course, some players won’t change. Republicans won’t stop screaming about the deficit because they weren’t sincere in the first place: Their deficit hawkery was a club with which to beat their political opponents, nothing more.…

But the policy disaster of the past two years wasn’t just the result of G.O.P. obstructionism, which wouldn’t have been so effective if the policy elite — including at least some senior figures in the Obama administration — hadn’t agreed that deficit reduction, not job creation, should be our main priority. Nor should we let Ben Bernanke and his colleagues off the hook: The Fed has by no means done all it could, partly because it was more concerned with hypothetical inflation than with real unemployment, partly because it let itself be intimidated by the Ron Paul types.

And there you have it: according to Krugman, the economy is stuck in a rut because (a) the federal government has been unwilling to run large enough budget deficits, while (b) the Federal Reserve has been unwilling to create enough new money.
In light of Krugman’s explanation, the following two charts are significant. The first shows the absolute dollar amount of “net government saving” (a negative number refers to a budget deficit):
It’s true, the above chart would not be quite as stark if I had converted it to percentages of GDP, but I want to remind the reader that just three years ago, the notion of a “trillion-dollar deficit” would have given Americans a heart attack. How many people remember that the pundits freaked out over George W. Bush’s stimulus package in early 2008? That package was a mere $152 billion.
We see a similar story when we turn to monetary policy. Here’s a chart of the “monetary base,” which is the narrowest measure of the money supply and is directly controlled by the Fed:

Do Krugman’s assertions make any sense at all? After seeing the above two charts, how can anyone in his right mind think that our economic sluggishness is due to insufficient deficits and a timid Fed?

There are two main explanations for how a smart guy like Krugman (and other sharp guys desiring more inflation, such as Tyler Cowen) can hold the views they do without their heads exploding.
First, if one’s model suggests that the solution to high unemployment and sluggish GDP growth is to boost aggregate demand, and then after these policies have been tried, unemployment is still high and GDP growth is still sluggish, why then, it’s obvious that the budget deficits and rounds of quantitative easing weren’t big enough. If you are certain that something is medicine, and the patient is still sick after a liberal dosage, then clearly the dosage wasn’t liberal enough.
Beyond that, Krugman and other proponents of more intervention do have some of the data on their side, as he explains in a blog post from last week:

The WSJ view was that federal borrowing would crowd out private spending by driving interest rates sky-high, that the bond vigilantes would destroy the economy. Note that when the linked editorial was published, the 10-year rate was at 3.7%, with the Journal in effect predicting that it would go much higher.

My view was that government borrowing in a liquidity trap does not drive up rates, and indeed that rates would stay low as long as the economy stayed depressed.

That’s a pretty clear test; among other things, you would have lost a lot of money if you believed the WSJ view.

Inflation is another issue; the WSJ kept telling readers that a big inflationary surge was coming. Commodity prices have muddied this issue to some extent, but even so actual developments on the inflation front have been a lot closer to what Keynesians were predicting than to the right-wing line.

Note Krugman’s brilliant rhetorical moves: The things that matter are the ones that he correctly predicted and the WSJ did not, namely interest rates and CPI inflation. Soaring commodity prices – which of course are consistent with the Peter Schiff view of the world, and not at all with the Keynesian “it’s all about demand” view – just “muddied this issue to some extent.” But we can just throw that out because we just know, deep down, that the Keynesian models are right and the right-wing models are wrong.
Krugman’s line about losing money by following the WSJ view is something he has been saying for a good year now, but it too isn’t so obvious. The one consistent bit of financial advice that the “paranoid” right-wing Tea Party types have been giving is to buy gold. (I myself was telling my readers to do this from the get-go, when I launched my personal blog in August 2008.) Over the last three years, gold is up more than 90 percent. That’s not too shabby for people who supposedly have been totally wrong about how this crisis would play out.
Note too that Krugman most assuredly did not call the huge appreciation in gold (or other commodities, for that matter). The only explanation I have ever seen him offer is that gold is in a bubble pumped up by Glenn Beck.
To my knowledge, no school of economic thought predicted all of the major trends back in, say, January 2008. The conventional Keynesians employed at the White House and in major forecasting firms were completely wrong about the Obama stimulus package. The “crowding out” Chicago School types were completely wrong about the deficit’s impact on interest rates. People like Peter Schiff (and yours truly) were completely wrong about consumer price inflation in 2009 and 2010. The “quasimonetarists” (who blamed Bernanke for his allegedly tight money policies) and Paul Krugman were completely wrong about gold and silver prices, and arguably about the fragility of the “recovery” in the stock market.
One thing is certain, and here I agree with Krugman when he concludes his article like this: “We already know what isn’t working: the economic policy of the past two years – and the millions of Americans who should have jobs, but don’t.”
Anyone with common sense will admit that the last two years have seen unprecedented budget deficits and monetary expansion. Krugman is correct; that hasn’t been working at all. It’s time to let the free market end this agony and bring us genuine recovery.
Regards,
Robert P. Murphy

The bottom-line, fundamental reason I endorse markets over government direction of the economy – the essential reason I support extensive and vigorous private property rights and the consequent decentralization of decision-making that this institution brings – is that I cannot tolerate the mysticism that motivates too much reliance on government.
Too many people, including otherwise very smart people, believe in secular magic. They believe that words written on paper by people, each of whom receive a majority of votes on certain days of the year of adult citizens living in certain geographic areas, and who utter ritualistic pronouncements under marble domes in buildings conventionally called “capitols,” are somehow endowed with greater understanding of society’s complexities and with superhuman capacities to care about the welfare of strangers. These priests preach devotion, dedication, and sacrifice to the One True State (your own government), even while each recognizes that legitimate disputes about the details of the dogma divide various cliques of the secular clergy. When they speak and act in their official roles, they expect – usually correctly – that the laity pay their words special heed as if these words have extraordinary power.
For example, what’s so special about President Bush expressing his sympathies to victims of Hurricane Charley? I’m sure that Mr. Bush’s sentiments are sincere. But does he feel for these victims more than I do? More than do, say, the presidents of USX, George Mason University, and the Saginaw, Michigan, chapter of the Knights of Columbus? I’m pretty sure that the answer is no. And yet, the media unfailingly report expressions of such presidential sympathies. When I ask myself why this is so, I invariably conclude that lots of my fellow Americans regard politicians – and the President especially – as possessing certain mystical powers, or an exceptional capacity to empathize and sympathize with strangers.
And, of course, the belief is rampant that enacting statutes with promising titles – for example, “No Child Left Behind Act” – will fulfill the aspirations expressed in the titles.
I suffer from an unusually acute aversion to mysticism, to unsubstantiated claims, and to mish-mash about “we as a nation,” “the hopes of the American people,” “pulling together as a country,” and other romantic foolishness that inevitably is meant to submerge each person’s individuality, wishes, and choices under the suffocating drabness of politicized and allegedly “collective” endeavors.

Wednesday, August 10, 2011

Reshorted S+P yesterday and today between 1145 and 1180, bear markey rally over. Looking for the downward move to continue. Closed my short 30yr bond position at a big loss. I still think buying treasuries is crazy, but you have to listen to the market. It was kind of a hedge anyway, limiting S+P profits. Also closed my short Yen (hedge) position. Went long Australian $, Canadian $, and Swiss franc, all trading positions against a dollar guaranteed to fall by the fed. Only extreme foreign central bank action in the name of mercantilism will stop the US$ slide, but the fed can overwhelm any and all of them if it chooses.

Tuesday, August 9, 2011

I covered a little more than half of my S+P short position @1133. Starting to think about re-shorting. This looks like a suckers rally, partially driven by falling US$. Remember, most of the biggest up days in market history occur during bear markets.

Saturday, August 6, 2011

1. The bigness of the lie. Adolf Hitler said: "Make the lie big, make it simple, keep saying it, and eventually they will believe it." William Hazlitt said, "the greater the lie, the more enthusiastically it is believed and greedily swallowed." And Hannah Arendt said:

This doubt of people concerning themselves and the reality of their own experience only reveals what the Nazis have always known: that men determined to commit crimes will find it expedient to organize them on the vastest, most improbable scale. Not only because this renders all punishments provided by the legal system inadequate and absurd; but because the very immensity of the crimes guarantees that the murderers who proclaim their innocence with all manner of lies will be more readily believed than the victims who tell the truth. (The Portable Hannah Arendt; pg. 120).

2. Mythical archetype of Osama Bin Laden and Islamic terrorists. Osama Bin Laden's iconic image and the creed of Islamic jihad against Western civilization is exciting historical material. It makes for a good Hollywood script. People are captivated and scared at the thought of Muslims rising against their oppressors, striking at the heart of the West and destroying America's two biggest cultural artifacts, the Pentagon and World Trade Center. But it is fiction, not reality.

The imperial masters of fiction crafted the Osama Bin Laden myth to symbolically represent the new spirit of the times and the changing nature of the global order in the post-Soviet Union collapse.

How do you lead a disoriented and leaderless mob? The Neocons, CIA, Mossad, and MI6 know the trick. You put your own manufactured revolutionary figurehead in front of the mob to mislead it and misdirect it towards violence and vengeance. In this case that figurehead is Bin Laden. This trick works the same in every society and in every age. Getting in front of the mob with a flag and a simplistic creed to follow is one of the ancient tricks of statecraft.

3. Most people are children who are easily controlled by fear and mentally guided by authoritative rhetoric. They will believe any absurdity if voices of authority tell them it is true. Authority is their father, and government is their mother. The State is infallible to them. They are psychologically incapable of mental rebellion and of questioning government stories and government statements.

4. Peer pressure, and the fear of mockery and ridicule. A lot of people, especially on the left, are afraid of being called a kook and a conspiracy theorist so they don't ever go out on a limb and tell the truth as they know it. They believe it is insane to question the foundations of the official 9/11 story so they don't even bother to examine the facts and evidence that serves as the bedrock of the 9/11 truth movement. The human herd stampedes on the fields of facts and the valleys of truth to get to the desert of ignorance.

5. Terrorism is regarded as a mysterious, hidden and arcane phenomena, and by showing proof that the CIA, Mossad and MI6 are behind terror attacks in the West we give people the knowledge to re-examine their beliefs and to act.

The idea that false flag terrorism can be explained by examining historical data (Operation Gladio in Europe, Pearl Harbor Attack, Gulf of Tonkin, U.S.S. Liberty) and by researching all the evidence complied by average citizens is an idea that discomforts a lot of people. They are put on the spot, because suddenly their false perception of the 9/11 events and terrorism in general unravels and shatters.

6. The financial-terrorism-media-military-industrial-Zionist-congressional complex is a beast of prey that puts out propaganda everyday to create a culture of disinformation and myth. This beast controls the most sacred opinions of the people.

As a result of the government-media war against the public mind the truth is mistaken for a product of insanity while the lie is cherished and protected. In this state most people are like fish in the water, they have no grasp that they are living and breathing in an ocean of lies.

7. Mass social, cultural, and political brainwashing. Western society is controlled by totalitarian governments and a totalitarian media system that includes television, print media, publishing companies, films, music, and other aspects of the culture industry. Conformity is preached and uniformity of thought is encouraged. A radical diversity of opinion about the war on terrorism, 9/11, and other government myths is not allowed.

8. A lack of knowledge of history. A lot of people are unaware of Operation Gladio, the U.S.S. Liberty attack, and the reality of false flag terrorism.

9. A lack of skepticism, curiosity and a sense of wonder. 9/11 truth deniers believe all knowledge about terrorism is settled, and that the government has a monopoly on truth. So they feel free to give up their mental independence on the question of 9/11 and go with the flow instead of using their analytical skills to dig deeper.

10. A lack of humility to admit ignorance. 9/11 truth deniers have a very high opinion of themselves and a low opinion of 9/11 truth-tellers. Why? Because they are arrogant, fearful and close-minded individuals.

11. The 9/11 lie is sacred. To question the lie and say the shadow governments of the United States and Israel were behind the attacks is sacrilegious and blasphemes. Questioning the lie threatens not just an entire worldview, but civilization as we know it. The individual's sense of well-being is based on the lie being real, and he/she undergoes the terror of psychological transformation when coming to face to face with the monstrous truth about 9/11.

The lie is a psychological attack on the community, the individual, and nature. The criminal conspirators behind the attacks and the cover-up want to destroy not just the truth and the dark history of that day, but the very idea of truth itself.

The capitalist system has lifted mankind out of mass poverty. It is this system that in the last century and in the last generation, has progressively changed the face of the world, and has provided the masses of mankind with amenities that even kings did not posses or imagine a few generations ago. - Henry Hazlitt

The American people will never knowingly adopt socialism. But, under the name of “liberalism”, they will adopt every fragment of the socialist program, until one day America will be a socialist nation, without knowing how it happened..I no longer need to run as a Presidential Candidate for the Socialist Party. The Democratic Party has adopted our platform. - Norman Thomas

So long as the people do not care to exercise their freedom, those who wish to tyrannize will do so; for tyrants are active and ardent, and will devote themselves in the name of any number of gods, religious and otherwise, to put shackles upon sleeping men. - Voltaire, 1764